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Mystery at Manas Strategic Blind Spots in the Department of Defense’S Fuel Contracts in Kyrgyzstan

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Mystery at Manas Strategic Blind Spots in the Department of Defense’S Fuel Contracts in Kyrgyzstan Mystery at Manas Strategic Blind Spots in the Department of Defense’s Fuel Contracts in Kyrgyzstan Report of the Majority Staff Rep. John F. Tierney, Chair Subcommittee on National Security and Foreign Affairs Committee on Oversight and Government Reform U.S. House of Representatives December 2010 For further information related to this report, please contact the office of Rep. John F. Tierney at (202) 225-8020 or visit: http://tierney.house.gov Cover Photo Credit: David Trilling/EurasiaNet.org December 20, 2010 To the Members of the Subcommittee: Today I present to you a report entitled, Mystery at Manas: Strategic Blind Spots in the Department of Defense’s Fuel Contracts in Kyrgyzstan, which has been prepared by the Majority staff of the Subcommittee on National Security and Foreign Affairs of the Committee on Oversight and Government Reform. After an eight-month investigation, the report exposes the troubling circumstances surrounding the Department of Defense’s massive fuel contracts at the Manas Transit Center in Kyrgyzstan. The report finds that the Department of Defense had a single-minded focus on supplying fuel to support the U.S. mission in Afghanistan but failed to properly oversee the political, diplomatic, and geopolitical collateral consequences of its contracting arrangements. At multiple critical junctures over the past eight years, both the Pentagon and State Department turned a blind eye to glaring red flags in the fuel contracts. Real and perceived corruption in the fuel contracts has now been linked to two revolutions and seriously strained U.S.-Kyrgyz relations. In June 2010, the Subcommittee Majority staff issued a report entitled Warlord, Inc. that exposed corruption and extortion along the U.S. supply chain within Afghanistan. The common theme between Mystery at Manas and Warlord, Inc. is the Department of Defense’s failure to manage and oversee the significant secondary effects of its wartime logistics contracting in South and Central Asia. The procurement of billions of dollars worth of jet fuel in Central Asia requires vigilant policy-level oversight and a clear-headed awareness of the high risk of corruption. Contracting rules that work in Boston are simply inadequate in Bishkek. This report offers some realistic recommendations to serve as a catalyst for what would seem to be a much-needed reconsideration of policy. The information contained in the report will inform the Subcommittee and the Congress as a whole as it formulates and oversees Afghanistan and Central Asia policies that serve vital U.S. interests. In turn, the Department of Defense would be well served to take a hard look at this report and consider how it can significantly improve its wartime contracting practices. Sincerely, John F. Tierney Chairman Subcommittee on National Security and Foreign Affairs Note on Methodology In December 2009, Subcommittee staff initiated an informal inquiry into the Department of Defense’s fuel contracts for the Manas Transit Center in Kyrgyzstan, a major U.S. refueling hub and waystation for U.S. troops going to Afghanistan. In April 2010, following a revolution in Kyrgyzstan and allegations of corruption in the fuel contracts, Rep. John F. Tierney, Chairman of the Subcommittee on National Security and Foreign Affairs, launched a formal investigation into fuel supply at Manas. To begin the investigation, Chairman Tierney issued document request letters to the Department of Defense, State Department, FBI, and the two affiliated fuel contractors, Mina Corporation and Red Star Enterprises. The Subcommittee received substantial and immediate cooperation from the Defense Logistics Agency-Energy, the contracting agency in charge of the fuel supply, and eventual cooperation from other components of the Department of Defense. The Subcommittee also received requested documents from the FBI. Ultimately, the State Department was able to produce a sizable number of responsive documents, but the slow and disorganized fashion in which the Department responded raises serious questions about the completeness of its document production and its current organizational capacity to respond to congressional inquiries. The Department of Defense and State Department also produced a significant number of classified documents to the Subcommittee in response to the investigation. Those documents have not been included or referenced in this report. Although issuance of a classified report would have shed additional light on many issues discussed here, the Majority staff believes that inclusion of the classified documents would not have materially changed the Findings or Recommendations. As discussed at length in the Findings, Mina and Red Star and their principals initially stonewalled the Subcommittee’s investigation but ultimately decided to substantially cooperate after Chairman Edolphus Towns of the Oversight Committee issued subpoenas for documents and testimony. The companies eventually produced over 250,000 pages of documents and two of their three principals agreed to be interviewed. In August 2010, Subcommittee staff traveled to Kyrgyzstan and the United Kingdom to interview witnesses from the companies, U.S. military officials at Manas, and senior State Department personnel at the U.S. Embassy in Bishkek. In addition, the Subcommittee met with a number of Kyrgyz officials and witnesses. The Kyrgyz Prosecutor General’s office is conducting an ongoing investigation into the allegations of corruption but has been unwilling to share any documents or preliminary results from that investigation with the Subcommittee. The Subcommittee staff also traveled to U.S. Transportation Command headquarters at Scott Air Force Base in Illinois to receive a briefing. Minority staff have been present at the Subcommittee interviews and received the documents produced in connection with this investigation. CONTENTS I. EXECUTIVE SUMMARY...............................................................................1 II. BACKGROUND................................................................................................9 III. FINDINGS........................................................................................................16 1. Mina and Red Star Have Successfully Provided Massive Amounts of Aviation Fuel to the U.S. Military in Kyrgyzstan and Afghanistan, but the Companies Operate in a Highly Secretive Manner that Often Conflicts with U.S. Diplomatic Interests.............................................................16 2. Mina and Red Star Are Beneficially Owned by a Kyrgyz National and an American Citizen with Backgrounds in Fuel Supply at Manas.............................................................................20 3. From 2003 through 2005, Red Star Subcontracted with Fixed-base Operators at Manas Controlled by the Family of President Akayev............................................................24 4. Mina and Red Star Deny Financial Ties to the Bakiyev Regime and the Subcommittee’s Investigation Uncovered No Credible Evidence to Link Them Financially.....................................................................................26 5. Mina and Red Star’s CEO Served as an Intermediary Between Maksim Bakiyev and the U.S. Department of Defense After Russia Pressured President Bakiyev to Close Manas........................................................................................29 6. DLA-Energy Conducted Only Superficial Due Diligence on Mina and Red Star, and Turned a Blind Eye to Allegations of Corruption.........................................................33 7. DLA-Energy Took Few Steps to Mitigate Potential Corruption and Ignored Red Flags of Anti-competitive Behavior....................................................................................................37 8. The Department of Defense Failed to Oversee a Highly Sensitive Fuel Supply Arrangement Created by Mina and Red Star to Disguise their Fuel Procurement..........................................................................42 9. The U.S. Embassy in Bishkek Claimed to Know Little About the Manas Fuel Supply Contracts Even After They Began to Seriously Undermine U.S.-Kyrgyz Diplomatic Relations.......................................................51 10. The United States’ Lack of Strategic Visibility into the Fuel Supply at Manas Led to Over-reliance on Mina and Red Star and an Unaddressed Vulnerability in the Supply Chain................................................................................53 IV. RECOMMENDATIONS...............................................................................58 Endnotes.........................................................................................................................60 I. EXECUTIVE SUMMARY On November 4, 2010, the Defense Logistics Agency-Energy (DLA-Energy), the Department of Defense’s principal fuel contracting arm, awarded Mina Corporation a $600 million contract to supply fuel to the Manas Transit Center in Kyrgyzstan, a critical transport hub for U.S. troops and planes going to Afghanistan. Since 2002, DLA-Energy has awarded Mina and its sister- company, Red Star Enterprises, four such contracts worth $2 billion for fuel at Manas, and has awarded several additional contracts to Red Star for fuel supply to the United States’ Bagram Air Base in Afghanistan. The day after the 2010 contract award, an official from DLA-Energy called the Majority staff of the National Security Subcommittee to ask who owned the companies. The Department of Defense did not
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